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In 1975, Indiana became the first state to enact comprehensive medical malpractice
tort reform with its Indiana Compensation
Act for Patients (INCAP), presently called the Indiana Medical Malpractice
Act. It has since been a model for other states because the legislation has stabilized
medical liability insurance premiums as well as successfully capped damage awards
and withstood challenges of constitutionality.
The Indiana General Assembly enacted the Act in response to its perceived crisis in Indiana’s
healthcare system. The Legislature cited the following as some of its reasons for
pursuing medical liability reform:
- seven of the 10 companies writing the majority of the medical liability insurance
policies in the state had ceased or limited writing those policies due to the inability
to adequately calculate premiums.
- premiums had increased as much as 1,200 percent during a fifteen year period due
to the frequency and size of claims.
- physicians in high risk practices were having difficulty finding insurance coverage.
- surgeries in some rural areas were being cancelled.
- emergency services at some hospitals were being discontinued.
- many healthcare providers were fearful of financial exposure and were unable to
get coverage for medical malpractice claims at an affordable price.
In response to the points noted above, the Legislature decided to cap damage recoveries in medical malpractice
cases so that Indiana malpractice insurance rates would not continue to rise at an astronomical
pace, making malpractice insurance more affordable and thus more available, thereby
reducing the cost of practicing medicine and improving access to healthcare.
Perhaps most significant to the stabilization of medical liability rates in the
state of Indiana is that the cap on damages has survived constitutional challenges
before the state’s Supreme Court. In Johnson v. St. Vincent Hospital Inc., the Court
found that the cap on damages did not violate the Indiana Constitution’s Equal Privileges
Clause, Due Course of Law Clause or the Right to Trial by Jury.
Indiana's Patient Compensation Fund
Raised twice since 1975, Indiana law currently caps damage awards available to a
patient at $1.25 million. Physicians are responsible for the first $250,000 in damages
to any patient for one act of malpractice; the state Patient Compensation Fund (PCF) pays
any excess, not to exceed $1 million—for a total of $1.25 million. The compensation
fund ensures a guaranteed source of compensation for injured patients. Since July
1, 1999, the surcharge has been based on an average of actual rates for all physicians
in the same specialty class or discipline according to the specialty’s risk to the
PCF. It is also significant that plaintiffs’ attorneys are not entitled to receive
more than 15 percent of any recovery from the compensation fund.
In addition to the cap on damage awards, the Indiana Medical Malpractice Act required
that all claims against healthcare providers must first filed with the Indiana Department
of Insurance and have their case evaluated by a medical review panel consisting
of three physicians. If there is only one defendant, at least two of the three panelists
must be from the defendant’s specialty. After the panel has issued its report, the
patient can choose whether to proceed to court. The panel’s report is admissible,
but not conclusive, and the panel members can be called as experts. The Legislature
argued that this would reduce the number of frivilous claims as well as encourage
the out-of-court settlement of those cases the review panel considered to be of
merit. The review panel requirement provides for low cost experts and a low cost
of litigation through the medical review panel process. Many, if not most, malpractice
actions are resolved at the panel level.
Patients filing a claim of malpractice must do so within two years of the alleged
incident of malpractice. Minors under the age of six, however, have until their
eighth birthday to file suit. In limited circumstances, patients may be allowed
to file after these time limits if the patient could not reasonably discovered the
malpractice within the time limit.
Summary
By capping damages as well as requiring claims to be filed in a timely manner and
pass the muster of a three-physician review panel, Indiana has been able to stabilize
medical liability insurance premiums, thus fostering the goal of available healthcare
for all the state’s residents. The Indiana State Medical
Association has pointed out that because of INCAP, patients have had access
to medical care unlike in other states where the malpractice liability crises has
led to cutbacks in procedures and physicians retiring or relocating.
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